Drilling advances

The New Year Eve’s towing incident notwithstanding, the Kulluk conical Arctic drilling rig was “absolutely” the best choice for Shell Oil’s Alaska exploration program, President Marvin Odom said during last month’s Innovation Summit at the operator’s newly expanded Houston Technology Center.

Odom defended the selection of the 30-year-old rig at a press conference during the Shell confab that drew an eclectic audience comprising engineers, scientists, academia, media, environmentalists, the financial community and other assorted disciplines. Joining Shell executives at the two-day summit was an equally diverse panel of speakers, including representatives from PepsiCo, MD Anderson Cancer Center, NASA and the X-Prize Foundation, which creates and manages large-scale, global incentivized technology competitions.

While the presentations to the full summit focused, by and large, on societal-enhancing innovations, the accompanying press conference quickly turned to the Kulluk rig that ran aground off Sitkalidak Island, while under tow following its abbreviated drilling program in the Beaufort Sea. When asked about Shell’s choice of the Kulluk, especially its dearth of self-propulsion capabilities, Odom said the operator is not about to second-guess the selection of the rig for its long-stymied Alaska drilling program. “The Kulluk was purpose-built for Arctic conditions,” he said. “We’re not questioning whether the Kulluk was the right rig for these Arctic conditions, as it absolutely is.”

Government regulations. When the Kulluk beached on the rocky shoreline, it gave new ammunition to veteran opponents of Arctic exploration, though Odom stressed they are largely shooting blanks on this one. “One thing we need to emphasize is that this was a marine accident and not a drilling incident. We need to draw that distinction.”

Odom said the Kulluk accident and the persistent delays it encountered in getting all the required government permits will not dissuade Shell in its exploration efforts in the Alaskan Arctic.

“Shell has a long-term strategy for the Arctic. This is not a North American issue, but a global issue, as 25% of the new world reserves to be discovered will come from the Arctic areas of the world,” he told reporters.

During a presentation to the full and ultra-diverse audience, Odom also gave what could be construed as a very un-operator-like response to a query on the impact of U.S. governmental regulations on domestic E&P operations. “There is a lot of concern about the inefficiencies of some government regulations,” he told the attendees. “But, frankly, in the development of gas onshore, we’ve never been busier, though it has slowed down recently in North America, due to the prices. We’ve also never been busier in the Gulf of Mexico. So, honestly I can’t say that we’ve been held back by any great extent today.”

On China, water and innovations. Besides Alaska, Odom and fellow Shell executives joining him in the press conference touched on a variety of subjects, ranging from the company’s China prospects, to frac water, to the often unlikely sources of innovation.

Responding to a question on why Shell selected MIT, a most atypical oilfield research institution, to conduct shale investigations, Gerald Schotman, Shell’s chief technology officer and executive vice president of Innovation, Research and Development, echoed X-Prize Chairman and CEO Peter Diamandis, who earlier told the summit that “innovation often comes from very unusual sources.” Diamandis had brought up the example of a former Las Vegas tattoo artist, whose small company was a finalist in an X-Prize oil spill cleanup competition.

“When people say that MIT is not an oil and gas academic institution, we say that’s exactly why we chose to work with them,” Schotman said. “The research we are doing with them involves studies in the fundamentals of shale with the aim of getting to the point that we only have to frac half of what we do today.”

He added that water management is a key component of Shell’s unconventional shale strategy. “We take both a short and long-term view of water and our objective is to make water a non-issue. In the short term, we look at re-use of water and how clever we are in using it. In the long-term, we look at new technologies that do not use any water. It’s all about making the entire fracing technology more efficient.”

On another shale-related topic, Schotman said Shell is actively developing its considerable holdings in China. “We have significant onshore acreage in China. We have drilled a number of exploration wells, but have no production history there. What is encouraging is that we find that much of the geological conditions are similar to those in the U.S.”

Lower Tertiary play. On a dramatically different issue, Odom said Shell’s record-setting Perdido spar, that sits in 8,000 ft of water in the western Gulf of Mexico, may be only the tip of the iceberg for the ultra-deepwater Lower Tertiary play. “If you look at the exploration prospects out there, there could be some deeper ones than Perdido,” he said.

Shell said the idea behind the Innovation Summit was to bring the operator’s business and technology leaders together with cross-sector experts “to explore how collaboration, particularly among unusual partners, can generate innovative thinking and new ideas on complex societal issues, such as the increasing stress among food, water and energy.”

The get-together also featured a rededication of the expanded and remodeled Houston Technology Center, now the largest of Shell’s three primary global R&D facilities. The other two technology centers are in Amsterdam and Bangalore, India.